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Moody's downgrades six Canadian banks

Moody’s has downgraded the long-term credit ratings of six large Canadian banks, citing concerns over record high Canadian consumer debt and soaring home prices.

Moody’s Investors Service on Monday cut the long-term ratings by one notch of the Bank of Montreal, Scotiabank, Caisse centrale Desjardins, Canadian Imperial Bank of Commerce, National Bank of Canada and Toronto-Dominion Bank.

The ratings of the six banks now range between AA1 and AA3, but they still rank among the top-rated financial institutions in the world.

‘‘Today’s downgrade of the Canadian banks reflects our ongoing concerns that Canadian banks’ exposure to the increasingly indebted Canadian consumer and elevated housing prices leaves them more vulnerable to unpredictable downside risks facing the Canadian economy than in the past,’’ said Moody’s vice president David Beattie.

By September 2012, the ratio of Canadian household debt to income reached a record 165 per cent, up from 137 per cent in 2007, as housing prices rose 20 per cent and Canadians borrowed more to afford to buy a new home, he noted.

Another rating agency, Fitch, also raised concerns on Monday about Canadians’ indebtedness but maintained its own high scores for the nation’s biggest banks, which also includes the Royal Bank of Canada.